August Inflation Rise Immediately Increases Mortgage Costs

Israel's Consumer Price Index (CPI) rose by 0.7% in August 2026, according to data released by the Central Bureau of Statistics. Over the past twelve months, the CPI has increased by 1.5%. This monthly rise directly impacts mortgage payments for loans linked to the index, increasing the debt balance by approximately 700 shekels for every 100,000 shekels borrowed.

Meir Vider, CEO of Vider Mortgages, noted that while the overall housing price index increased by 0.2%, new apartments saw a 0.5% rise, and even higher when excluding subsidized deals. This combination of relatively high inflation and rising housing prices could burden both existing mortgage holders and new buyers, while also limiting the Bank of Israel's options for further interest rate cuts.

Strategic advisor Eran Buchris highlighted that the August inflation figure signals persistent inflationary pressures. For businesses, this means increased operating costs and potentially prolonged periods of high borrowing costs, especially for small and medium-sized enterprises. Buchris also pointed out that the modest rise in housing prices suggests a real estate market struggling for momentum.

Roy Kadosh, Chief Investment Officer at Hachshara Investments, stated that the August CPI increase was largely expected and kept the annual inflation rate within the target range. He attributed the monthly rise to seasonal factors like increased costs for flights, transportation, culture, entertainment, fresh produce, and rent renewals, partially offset by decreases in fruit, clothing, and food prices. Kadosh anticipates a slight decrease in the September CPI and believes the Bank of Israel will continue its gradual interest rate reduction path early next year, closely monitoring future inflation data.